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2020/15: Paraísos fiscales, wealth taxation, and mobility

This paper analyzes the effect of wealth taxation on mobility and the consequences for tax revenue and wealth inequality. We exploit the unique decentralization of the Spanish wealth tax system in 2011—after which all regions levied positive tax rates except for Madrid—using linked administrative wealth and income tax records. We find that five years after the reform, the stock of wealthy individuals in the region of Madrid increases by 10% relative to other regions, while smaller tax differentials between other regions do not matter for mobility. We rationalize our findings with a theoretical model of evasion and migration, which suggests that evasion is the mechanism most consistent with all of the mobility response being driven by the paraíso fiscal. Combining new subnational wealth inequality series with our estimated elasticities, we show that Madrid’s status as a tax haven reduces the effectiveness of raising tax revenue and exacerbates regional wealth inequalities.

2020/14: “Mom, Dad: I’m staying”. Initial labor market conditions, housing markets, and welfare

Young individuals are currently living with their parents more than at any other point in time, while also spending more on housing. In this paper, I first show how labor market entry conditions affect housing tenure and affordability in the long term, by using the unemployment rate at the time of graduation as an exogenous shock to income. I perform this analysis across Europe for the last 25 years. Results indicate that a 1 pp increase in the unemployment rate at the time of graduation leads, one year after, to (1) a 1.50 pp increase in the probability of living with parents, (2) a 1.02 pp decrease in the probability of home-ownership and 0.45 pp decrease in renting, and (3) worse affordability. Second, I develop an OLG model to link income shocks for young agents with changes in housing tenure at the aggregate level. I allow for an outside option for landlords which can introduce rigidity into the rental market. Results show that if rental markets are rigid, an income shock to young agents will translate into a larger share of them living with their parents, worse affordability, and larger welfare losses. Finally, I perform a policy exercise based on the French housing aid system. I show that housing aid policies can help to recover welfare losses for young agents, by enabling them to afford to rent. Recognizing the right scenario for the implementation of these policies is key to ensure welfare gains concentrate on the targeted population.

2020/13: Covid-19 and help-seeking behavior for intimate partner violence victims

Using detailed data at the local level on the number of calls to the domestic violence emergency hotline in Spain, we study the effect of the COVID-19 outbreak and the quarantine measures imposed on the help-seeking behavior of intimate partner violence victims. Our analysis focuses on Spain, which is one of the European countries that was most affected by the COVID-19 pandemic and, as a consequence, implemented one of the strictest quarantine policies in Europe. We find that the implementation of the lockdown policy was associated with a 41 percentage point increase in the number of calls to the emergency hotline compared to the pre-policy period. This effect was stronger during the strict confinement period but persisted in the medium term, after quarantine was lifted. Using detailed mobile phone data to measure mobility levels, we document stronger effects in provinces whose effective mobility reduction was more intense. Our results are crucial from a policy perspective, as many countries are faced with a second wave of the pandemic.

2020/12: Political cycles and yardstick competition in the recycling of waste. Evidence from Italian provinces

Recycling and the recovery of waste are crucial waste management strategies. In light of the new EU circular economy approach, these strategies remain core pillars of a competitive and sustainable waste value chain. Local governments have an important role in controlling and checking the implementation of waste management policies. We study the spatial determinants of waste recovery by using a dataset of 102 Italian provinces from the years 2001-2014. We exploit the political cycle of the provinces to isolate the effects of waste recovery in one province on neighboring provinces. We find that provinces mimic their own neighbors’ in the separate collection of waste aimed at recycling and recovery, with this effect being fully guided by provinces where the president can run for re-election (consistent with the yardstick competition hypothesis) but only when waste management policies become politically salient, that is, after the transposition of the 2008 EU Waste Framework Directive.

2020/11: Congestion in highways when tolls and railroads matter: evidence from European cities

Using data from the 545 largest European cities, we study whether the expansion of their highway capacity provides a solution to the problem of traffic congestion. Our results confirm that in the long run, and in line with the ’fundamental law of highway congestion’, the expansion in cities of lane kilometers causes an increase in vehicle traffic that does not solve urban congestion. We disentangle the increase in traffic due to the increases in coverage and in capacity. We further introduce road pricing and public transit policies in order to test whether they moderate congestion. Our findings confirm that the induced demand is considerably smaller in cities with road pricing schemes, and that congestion decreases with the expansion of public transportation.

2020/10: Law incentives for juvenile recruiting by drug trafficking gangs: empirical evidence from Rio de Janeiro

We evaluate the deterrence effects of the age of criminal responsibility on total drug trafficking and homicide crimes per age, based on a quasi-experiment generated by differences in punishment severity for these crimes prescribed by the Statute of the Child and Adolescent and by the Penal Code in Brazil. To this end, information from arrests conducted by the civil and military police of the state of Rio de Janeiro in 2016 and 2017 is used to estimate the local effects of treatment through a Regression Discontinuity Design. Instead of using recidivism data and/or grouping crimes with distinct punishment severity, we use as outcome variable the total number of arrests (crimes) per age for drug trafficking and homicides, which are the most common crimes related to organized crime in Rio de Janeiro. The results indicate that the increase in punishment severity generated by the Penal Code can reduce the number of drug trafficking-related crimes by 9% and homicides by 37%. Through a simple cost-benefit analysis, we suggest that increasing the punishment severity for minors who commit homicide could reduce juvenile’s engagement in a criminal career associated with gangs and generate gains in social well-being.

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